Obama admin: time to make radio pay for its music

One of Washington's most acrimonious debates has been the decades-long feud …

The recording industry scored a significant victory today with news that the Obama administration will provide its "strong support" for the Performance Rights Act. The bill would force over-the-air radio stations to start coughing up cash for the music they play; right now, the stations pay songwriters, but not the actual recording artists.

This has been a dream of the recording industry for decades, but it has taken on new importance as the revenues from recorded music have plummeted over the last decade. The broadcasters refer to the idea as a new "tax" that will largely benefit foreign record companies such as Universal (France), Sony (Japan), and EMI (UK).

Taking sides

Today, a letter from the Commerce Department's general counsel, Cameron Kerry, makes clear which side has the administration's support: the recording industry. (We double-checked with Kerry's office; this is no April Fools' joke.)

"The Department has long endorsed amending the US copyright law to provide for an exclusive right of public performance of sound recordings," says the letter. It pledges "strong support" for the current bill and approves the idea that radio's payment exemption is nothing more than "an historical anomaly that does not have a strong policy justification."

A copy of the letter was sent to Sen. Patrick Leahy (D-VT), chair of the Senate Judiciary Committee. In the letter, Kerry says that making radio pay for music is really a matter of fairness—not just to artists, but to Internet webcasters and satellite radio, too.

That's because both webcasters and the satellite radio folks currently do have to pay a public performance right on the music they play; the exclusion granted to over-the-air broadcasters thus distorts the market and makes it difficult for new technologies to gain traction. "It would also provide a level playing field for all broadcasters to compete in the current environment of rapid technological change, including the Internet, satellite, and terrestrial broadcasters," says the letter.

In addition to rationalizing the performance rights scheme in the US, Commerce points out that the US is the only major industrialized country to have such an exemption for over-the-air radio. Making a change isn't just a case of bowing to peer pressure; real money is at stake, since many artists are unable to collect the public performance money due them in other countries because of "the lack of reciprocal protection under US copyright law."

The National Association of Broadcasters, which represents radio, hasn't yet responded to the letter—but its position is clear. "This new performance tax could financially cripple local radio stations, stifle new artists trying to break into the recording business, and harm the listening public who rely on local radio," it says, and the NAB has managed to round up 260 House members in support of a resolution called "The Local Radio Freedom Act."

In addition, the NAB (correctly) points out that it has been the broadcasters who repeatedly engaged in "payola" over the years; not only has radio paid nothing to the recording industry, but the industry has gone to the trouble of paying extra to radio, just for the privilege of promoting particular songs.

However the issue is decided, some major corporations are going to benefit. If radio keeps its exemption, it's a win for big broadcasters like Clear Channel. If radio's exemption gets the axe, much of the money being paid will flow into recording industry coffers. But, as the Commerce filing points out, the current system is ridiculous; it needs to be decided in one way or another. Requiring some broadcasters to pay for music while others get a free ride, based simply on a difference in delivery mechanism, is no way to run a system, and it's no way to encourage innovation.

Update: NAB has issued a statement. "NAB was aware this letter was coming, which is a position taken previously by the Bush Commerce Department. We're disappointed the Commerce Department would embrace legislation that would kill jobs in the US and send hundreds of millions of dollars to foreign record labels that have historically exploited artists whose careers were nurtured by American radio stations. The good news is that 260 members of the House of Representatives and 27 US Senators are standing with hometown radio stations and against the RIAA."

I don't understand why it's not the same for Internet, Satelite, and AM/FM radio. Sure, it's a new tax, sure it will put a lot of small radio stations in dangerous financial position, but I don't understand the problem with that: if your business model can't survive, then change it or shut down!

The absolutely RIDICULOUS "foreign" music company arguments I hear from the local radio stations here in San Diego are also pushing me to agree with the whitehouse on this one. Why is a big label music company a good thing when they sign a local artist to a big money deal and then a bad one when they want to get paid and recoup their investment?

I don't think artists killed radio, I think radio killed itself in much the same way that newspapers are killing themselves.

Seriously, I can't STAND most local radio now. They play crap music from big labels and I can get better service from internet radio. If Pandora can survive in this business model why should crappy local radio be able to get by without paying their way?

No no no no no! You're going the wrong way. You practically killed internet radio when you made them pay both licenses and per-song-per-listener royalties that terrestrial radio has always been exempt from thanks to the free publicity they offer by playing the music.

They should be removing the royalty system from internet radio to help keep this burgeoning new medium from dying out, not trying to drag the shitfest that commercial radio has become further down the payola crapper.

The recording industry as well as the movie industry contributed millions to the election campaigns plus the continuing "donations" and they expect something for their money. It's plain and simple. In a more ethical country this would be called bribery. It's funny that Obama castigates the government of Afghanistan for corruption when corruption is so endemic in this country.

It wasn't that long ago that the labels paid radio to play their music for publicity. What will they say when radio stops playing?

I don't understand why it's not the same for Internet, Satelite, and AM/FM radio. Sure, it's a new tax, sure it will put a lot of small radio stations in dangerous financial position, but I don't understand the problem with that: if your business model can't survive, then change it or shut down!

The absolutely RIDICULOUS "foreign" music company arguments I hear from the local radio stations here in San Diego are also pushing me to agree with the whitehouse on this one. Why is a big label music company a good thing when they sign a local artist to a big money deal and then a bad one when they want to get paid and recoup their investment?

The problem is radio won't make money because advertisers won't pay them enough to cover the cost of licensing. Yeah, it's a 'failing business model', but there is nothing radio can do to change that. They have no control over the issue. If you want smaller stations to survive they cannot pay licensing schemes. If you don't mind that all the radio is owned by clear channel, well, it looks like you're going to get your wish.

I don't understand why it's not the same for Internet, Satelite, and AM/FM radio. Sure, it's a new tax, sure it will put a lot of small radio stations in dangerous financial position, but I don't understand the problem with that: if your business model can't survive, then change it or shut down!

They will change. If the "Industry's" music becomes too expensive to play, they'll turn to the stuff that isn't: like Indy bands.

Then watch the Big Labels start whining when their greatest promotional tool is no longer "playing fair".

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The absolutely RIDICULOUS "foreign" music company arguments I hear from the local radio stations here in San Diego are also pushing me to agree with the whitehouse on this one. Why is a big label music company a good thing when they sign a local artist to a big money deal and then a bad one when they want to get paid and recoup their investment?

Radio has been the biggest promotional tool of labels for the last several decades. The relationship has been symbiotic; you scratch my back, I scratch yours.

The vast majority of big name artists are only big BECAUSE their songs were played on the Radio. The Big Labels even paid radio stations to ensure their songs were played (see Payola).

All this 'tax' is doing is saying "We want your promotional power, we want your money, and if you break up with us, we've got friends in the government that can force you back".

I'm really becoming disgusted with this administration's pro-copyright stance. From their blanket support of ACTA to meeting with content companies behind closed doors, everything they've done screams that they're in the industry's pocket.

This will just make the "payolla" legal - now the Recording Company can say, 'you have to pay us to play all these songs - except this one'

And if station owners are smart, they will tell the Recording Company to take a hike, play Indy music for a month and then watch Recording Company crawling back after nobody buy the crap they have been producing for the last decade.

This will just make the "payolla" legal - now the Recording Company can say, 'you have to pay us to play all these songs - except this one'

And if station owners are smart, they will tell the Recording Company to take a hike, play Indy music for a month and then watch Recording Company crawling back after nobody buy the crap they have been producing for the last decade.

...or just file bankruptcy when no one listens to the radio that isn't allowed to play any hit from the last 50 years.

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since many artists are unable to collect the public performance money due them in other countries

I'm surprised the article didn't home in on this. It's not the artists, it's the INDUSTRY, ie the big publishing companies. The actual artists aren't going to see a penny of this.

If they make an exception for college and public radio then go ahead and squeeze the commercial stations for everything they've got. The only requirement is that all moneys collected should be reported to the public to see how much the artists themselves actually got in all this.

My faith in the Obama administration is going is going down the tubes [and not the fun tubes either]. What happened to the whole supporter of open internet, technological not-idiot from back in the elections ? That's practically why I voted for him. Now he's doing shit like supporting the ACTA in its entirety [which the vast majority of Europe rejected, btw, ^5], essentially killing radio stations [granted, I don't listen to these if I can help it anyways, as they play 30-40% crap and talk 60% of the time], supporting Big Content's requests for more draconian control, and the basic and systematic removal of any and all end-user IP rights. Well done, Obama admin, you had a rather good chance to appear as a good president [considering what you were following], and you've so far managed to enflame pretty much the entire conservative side [I admit, Faux News hasn't helped there], and more and more liberals are rethinking their decisions. Seriously, this is like striking out in teeball.

That's is some weak bull...., as for the person that said "...if your business model can't survive, then change it or shut down!" Funny because that's what I think of when I hear the record labels crying about their predicament. Of course instead of trying to change they'll just create new "revenue streams" by crippling the radio stations by taxing the hell out of them. It will never happen, but if radio stations could start charging record labels for "advertising" their music. Once again I think the record labels are over valuing what they have and refuse to see any of the benefits that radio offers them.

So go ahead government and help prop up old businesses that refuse to change. Their fall is just that much more fun to watch when the internet kicks the crutch out from under 'em.

Artists are forced to sign away their rights for a distribution deal therfore any extra money coming in won't go to the artist but to the execs, who will then spend it on coke 'n' weed and politicians and lawyers

I know some people that work in radio. While I don't know the complete details of their business, I can safely say that there's no way that they can afford this.

This is going to put radio stations out of business all across the country, or it will simply force further mega-media consolidation as local radio groups that only own a half dozen stations fall to buyouts from ClearWire because they can no longer afford to stay in business.

Local businesses will die, mega-media will gain more control, people will lose jobs, and local artists will lose outlets that they rely on to get their music on the airwaves to gain fans.

chronomitch wrote:

I wonder what the artists and record labels will say when they realize they killed radio.

They won't care, because radio won't be killed - the mega-media conglomerates like Clear Wire will take over all of the small stations.

So wait, Im just trying to understand here, we recognize that "Big" Radio plays songs and doesn't have to pay the industry for the privilege, but Sirius/XM, Web broadcasters have to. "Big" Radio has multiples of millions of listeners compared to Sirius/XM, Web broadcasters, and a larger audience nationwide to boot when compared to the parties that have to pay for the privilege. Yet, making "Big Radio" pay, just like everyone else, is unfair, unconstitutional, and somehow Obama is wrong for this? It's called a level playing field right? Or are you implying that he should strike down the "industry's" ability to charge for it's product? That would be ant-capitalist would it not? A govt telling private industry that by law it cant charge for its own created good/service?

Yes, all the delivery mechanisms should cost the same but it should be decided by the owner of the music, not a flat rate for everything. I know that if I were trying to get popular I would let my songs be played for free but if I were established I'd want a higher fee per song per listener.

How about setting up a system where artists can opt-in and decide the rate they want and then stations can play whatever based on that list?

Also somebody seriously needs to crack down on DJs that string songs together and call it their own without paying any royalties.

So wait, Im just trying to understand here, we recognize that "Big" Radio plays songs and doesn't have to pay the industry for the privilege, but Sirius/XM, Web broadcasters have to. "Big" Radio has multiples of millions of listeners compared to Sirius/XM, Web broadcasters, and a larger audience nationwide to boot when compared to the parties that have to pay for the privilege. Yet, making "Big Radio" pay, just like everyone else, is unfair, unconstitutional, and somehow Obama is wrong for this? It's called a level playing field right? Or are you implying that he should strike down the "industry's" ability to charge for it's product? That would be ant-capitalist would it not? A govt telling private industry that by law it cant charge for its own created good/service?

The obvious alternative to making "Big" Radio pay to play songs is to stop making Sirious/XM and web broadcasters pay. We'd get the same level playing field, just without the extra costs for terrestrial radio stations. That won't happen, though.

As for seeing a renaissance for independent music as a result of this, that probably won't happen either, IMO. "Big" copyright holding companies can grant access to large catalogs for one fee, and set fee structures however they like them to encourage "Big" radio to play the songs that they want played to their consumers on the other end of the airwaves. Unless Independent musicians can form a collective to offer large catalogs under standard licenses, etc., they're unlikely to get access, because the large corporations who own radio stations won't deal with a bunch of little licenses.

Then, after the industry struggles with this, CTIA, the Wireless Association will claim that commercial FM radio is a wasteland and they should get the spectrum. There won't be any more FM radio (and perhaps not AM either, if CTIA decides they want that band) because it's all going to be serving IP to mobile devices.

Maybe independent musicians can write iPhone apps and get their music out that way?

this is long overdue. everyone should have to pay at least the amount net-radio got slammed with in 2008. radio stations loved the fee structure when they used it to cripple and or kill net radio in the usa. now its their turn.

This will just make the "payolla" legal - now the Recording Company can say, 'you have to pay us to play all these songs - except this one'

And if station owners are smart, they will tell the Recording Company to take a hike, play Indy music for a month and then watch Recording Company crawling back after nobody buy the crap they have been producing for the last decade.

Yes!

Let's make radio pay.

Radio then will start promoting "free" local or national bands who don't charge for the performances.

Sales of indy music will go up because no one will ever hear the commercial stuff except on commercials.

If you want your music played on the radio, you therefore have to pay the broadcast fees...

I am really disappointed in this administration's blanket support for the copyright lobby. They claimed they were going to "push back" against the influence of lobbyists. This is not a surprise though. Dems have always been in bed with hollywood and the music industry. The people be damned. The only way fair use and the rights of the people will ever be considered by politicians is when the ability of the people to out-lobby the entrenched content industry becomes a reality. It looks like young people will be sitting out the next election. Good luck to the Dems. They are going to need it.

As an indy writer, performer and record lable, I deal with some of this stuff from the trenches and it's not pretty.

There seem to be some misconceptions floating around, so I hope I can bring some light.

Performance Rights came about because radio stations were using recorded music to build their audience and get advertisers to pay. At the same time, radio as the gatekeeper, can also make or break an artist, so the relationship is not one of equals. Radio can say to the artist "Let us play your stuff for free or we won't play it." and the artist would have to agree. Nothing kills an artist like obscurity. So (along with MANY other reasons) codified how songwriters would get paid for perfromances of the music they wrote, and set a statutory rate of some number of pennies per song played. Each plays royalty went half and half to the publisher and the writer, and could not by law be paid to anyone else. Radio worked out a deal where they paid a blanket annual fee, called blanket licensing based on the size of their market.

Sounds like a fair deal right? The devils end up being in the details. The radio stations pay these blanket licenses to three organizations: ASCAP, BMI and SESAC, supposedly non-profit organizations who collect and distribute and take a small administrative fee. But as it turns out, they also collect form mom and pop coffeehouses that play live music, restaurants that have radios playing in the kitchen or pipe music to the house and pretty much any other place they can collect. But how do they distribute the money?

It's ALL based on major market radio play. So your mom and pop songwriter showcase that presents 100% original material by the original artists ends up paying $1200 a year to have music that they don't use - and the artists that they present aren't part of the system at all. And UNLESS we get lucky and convince local radio to play our stuff AND happen to be played at a time when THAT station is surveyed by the Performance Rights Orgs (PROs) we'll never see dime. (AND THEN ONLY IF WE'RE AFFILIATED WITH ONE OF THE PROS.)

All the Performance Rights Act does is to add something like 5 cents a play to be split by the musicians who played on the record - and another 5 cents to the lable.

At this point until there is a non-interested party collecting those royalties, I'm opposed to any law that puts more money in the hands of labels. Even then, we need to limit the scope of places the PROs can collect from so that small time performance venues don't get shaken down by these legal extortion schemes.

As an indy, I'm making more money than I ever did before internet radio took off - at least I get a *chance* to heard. In the old days of terrestial radio only, I didn't stand a chance.

Well, I guess that's one way to level the playing field, but what it actually does is make it much more cost effective to convert your station to a talk format. Radio has become nearly useless for promoting music, since the big companies like Clear Channel have such tight playlists and copycat formats across the country. This just ensures that the Madonnas and flavors-of-the-month get lower sales. The people who buy music aren't really listening to the radio, though.

Still, it doesn't seem right that Sirius, who have paid millions to launch satellites for broadcasting, should have to pay while stations that have been given access to the public airwaves don't.

Look what happened to MTV, the minute the labels started making noise about how they should charge for videos, MTV and VH1 went straight into the business of creating their own content. Does either channel play music any more, and do you think that might have something to do with lower sales?

I turned off the radio 15 years ago and NEVER looked back. I would rather sit in silence and listen to the wind than turn on the radio. I got tired of hearing the same drek over and over on every station no matter what format they played. And that was just the 'DJs', don't even get me started on the music. Now I find all of my new music via word of mouth and streaming stations.

Radio never supported local music unless it sounded exactly like the drek they played anyway so there's no change there. The only exception would be college radio but they seem to have went to smooth jazz because that demographic is the only one who payed up when it came donation time.

Honestly, after the bitch fit that was pitched to make internet radio pay the same exact thing they are now fighting all I can say is:

TAKE IT, BITCH! TAKE IT!

I turned the Idiot Indoctrination Box off 5 years ago and now I have all this free time to pursue creative endeavors like...making music.